Friday, January 30, 2015

Mr. “Corporations R. People” will not be running for president again after all, he announced today.

Some of the corporate media were so certain Mitt Romney was announcing his candidacy that they actually ran headlines to that effect, only to retract them 15 minutes later. But if Romney based his campaign last time around on the “corporations are people” line, he remained true to his principles today. Romney’s reason not for running was that he couldn’t get the funding for his campaign. And when you remember some of the more offbeat television commercials from the Romney campaign, including one where he proposed banning solar panels and shutting down one solar cell manufacturer in particular, you realize what this really means is that he couldn’t line up enough corporate sponsors to finance a third presidential run.

Romney campaigned on the theme of corporate rights before anything else. He put corporations first and people a distant third at best. Those priorities remained in place with his announcement today. Romney still had the same voter support that he had four years ago and the same connections with political insiders, but today, none of that mattered. It was not the people but the corporations that decided Romney could not run again.

Thursday, January 29, 2015

Stability has finally come to Greece, where a labor-democracy coalition party won a near-majority in the election and pledges to begin undoing the damage from six years of fiscal austerity. The new government has already stopped the sale of public assets. Banks in Russia are in worse shape than their balance sheets indicate. One sign of this is the large number of home mortgages, millions of them, denominated in foreign currencies. This is an accounting trick to make banks’ net foreign obligations appear much smaller than they really are. Probably every bank that employed this trick is in fact already insolvent after the 60 percent decline in the ruble — and this includes some government-owned banks.

Update: There was a Friday night credit union closing in Philadelphia. American Bakery Workers Federal Credit Union had 1,500 members. Member share accounts are being transferred to TruMark Financial Credit Union.

Tuesday, January 27, 2015

It is a little too obvious when you see the media coverage of today’s blizzard that writers knew the big storm was coming and had their pieces written in advance. The stories are about reporters’ and analysts’ presuppositions rather than about what is actually going on. One way to tell that writers aren’t really paying attention is that there are more stories about the places where the snow didn’t fall than about the places where it is actually falling at the moment, or where roads are closed by one or two feet of snow on the ground. Climate scientists and climate-change politicians knew a big storm was coming at some point this winter (because of climate change, natch) and are using the occasion to pitch the connection between global warming and the jet-stream extremes that create extreme weather. The connection is scientifically accurate, but the attempt to link it to any specific storm is dubious. For their part, climate deniers are eager to show that today’s storm isn’t setting many records or killing many people, as if only an absolutely unprecedented disaster could make the idea of change seem worth considering.

Some of the writing is just irresponsible. The Washington Post has been hammering “forecast failures” all day after only a dusting of snow there, ignoring the fact that the weather forecasts never put Washington anywhere near the heart of the northeaster, and also ignoring the astonishing accuracy with which weather models predicted the timing and intensity of a storm before the first clouds had even formed. The fact that the forecast accurately predicted a blizzard right down to the hour could more easily be seen as a success than as a failure, but that wouldn’t be much of a story, would it?

Meanwhile, the storm is still going on. Here, snow fell for 38 straight hours, a noteworthy weather event for its persistence if nothing else. When it finally ended at the end of the morning, it was only because the sun had so thinned out the clouds that there was no place left for the snow to fall from. In eastern New England, several more inches of snow may fall in the next eight hours. If I spent two hours shoveling snow today, friends in the Boston area spent the whole afternoon trying to dig out, only to get up tomorrow morning and go at it again. In that context, how can you describe the people in Washington who are trying to tell us the storm never happened? Is it going too far to say that Washington is basically a southern city where people don’t necessarily know what winter means?

Monday, January 26, 2015

I am in the lull between the two storms, but snow is still falling. If my local forecast for the week is a touch lighter than yesterday, the broader weather picture is worse, with half a meter of snow and blizzard conditions likely tonight and tomorrow in a band from central New Jersey to central Maine. The storm will affect a quarter of the population of the country. As one quick measure of the extent of the weather trouble, already 2,500 U.S. flights are canceled today according to FlightAware. That number can only increase, and a larger number of cancellations tomorrow is assured. Where I am, there is only an inch of new snow so far, but my meetings for the morning were held by phone with other workers also staying home for the day. Some workers are leaving for home shortly after lunch. It is a sensible precaution. If everyone tried to get home at 4 p.m. just as the brunt of the storm was setting in, it would be a setup for a disaster film.

There is already noteworthy damage from Friday’s storm. A parking garage collapsed under the weight of snow in New Jersey. That storm brought extraordinarily wet, heavy snow. The high winds of Tuesday’s storm will surely prevent the same amount of snow from building up on rooftops.

I have special concern for New York City in the coming storm, and not just because it has so many people in a small area. It is a city not particularly known for its respect for forces of nature. In a city that had hurricane parties and swine flu parties, I worry that many people there may not understand what “blizzard warning” implies, and may suffer harm trying to arrive fashionably late for a blizzard party. I can’t remember the last blizzard warning for New York City, and people there who have no reason to think about the weather on a normal day may have trouble imagining snow blowing with such intensity that you cannot see across the street. To put the seriousness of the storm in city terms, most of the subway could shut down. The mayor says to go home early, and how often does that happen?

There will be no after-school activities today, and we encourage everyone to head home before the evening rush. #Blizzard2015#SafeNYC

The strategy for a blizzard is simple enough: go somewhere safe and stay there until conditions improve. But I can’t say this without imagining one of my New York friends responding with, “You’ve gotta be kidding me.” Well, don’t take my word for it, but listen to someone. More NYC details from New York Times: New York Today: ‘Crippling and Potentially Historic Blizzard’.

The #blizzardof2015 is coming so please stay safe inside, unless you're a TV reporter whose job is to stand in the snow like a dumbass.

Sunday, January 25, 2015

Snow is the topic of the day where I am. The reason is obvious enough if you look at the weather forecast. Aside from a 36-hour break at midweek, we can expect snow all week long, off and on from Sunday night until Friday afternoon. It will be a good week to stay home, for anyone who can. Of course, we don’t really know the weather five days in advance, but the possibility of a very snowy week has people making preparations today. I have already completed the errands I had planned for tomorrow. I haven’t seen any supermarket shelves this afternoon, but it seems likely enough that the displays of bread, milk, peanut butter, and eggs are visibly depleted by now.

Snow can be a major inconvenience even without a major storm. Where I sit I can expect to be on the edge of a classic northeaster that poses a greater threat to points from central New Jersey to central Maine. Here that storm may be just the third of five snow events in the span of a week. It is the continuing pattern of snow that makes it such a bother. There is a slight chance I could be stuck in place for the entire work week. In southern Pennsylvania, that is such an unfamiliar scenario that I have to stop and think carefully about my contingency plans. I am not likely to lose power but I will be running the dishwasher today instead of waiting for tomorrow, just as a precaution. The uncertainty alone, and affecting so many people, is enough to slow things down.

Saturday, January 24, 2015

Several of the headlines this week reminded us of the immense financial scale of the banking sector. I’ll start at the low end, which in banking is millions, and move up. Wells Fargo is paying $35 million in penalties for improperly steering mortgage applicants to a title company in exchange for bribes and kickbacks. The bank somehow failed to discover the corruption in its ranks even after Federal regulators told it the specifics of their investigation. Two other banks were also involved with this scheme, but one will pay a much smaller penalty because of its quicker response, and the other will not pay penalties because it discovered and resolved its problems without the assistance of regulators. The size of Wells Fargo’s penalty is larger than some entire banks, but Wells Fargo is so large that this incident does not even count as an embarrassment. It will be no more than a footnote in its quarterly statement.

Moving up into the billions, JPMorgan Chase is stuck with a $1.5 billion loss that results from an “clerical” error (but don’t blame the clerks, this mistake was made by bank executives and corporate attorneys) in an earlier court filing, which released the bank’s security interest in one more asset than intended. An appeals court this week said it could not simply overturn an incorrectly filed document when there are other parties involved.

Next, a trillion, which can be found at two places in Europe. A stopgap bank bailout in Russia is valued at 1.5 trillion rubles, which with the decline of the ruble last year is the equivalent of just $25 billion. Two thirds of the funding will be provided by a program announced today by the Finance Ministry, with the rest to come from private investors. The deposit insurance fund will provide a small amount of additional assistance to systemically important banks, apparently in the form of bond repos.

The European Central Bank plans to purchase €1 trillion in bonds and other assets to support the economy of the euro zone. This will make a slight difference in the broader economy, but the effect will be felt most immediately in the banks. The asset purchases and reduced interest rates will take much of the financial pressure away from Europe’s many troubled banks.

There is only one area of the financial sector where we can meaningfully talk about quadrillions. We were reminded this week that the shadow banking system is larger than ever, especially in the United States, Europe, and China. By some estimates it has grown twice as large as it was during the collapse of 2007–2009 — and at that point, it was already a multiple of the size of the legitimate banking system. The scale of the shadow banking system is indicative of how top-heavy the financial sector is, and that tells you how easily a change in relative asset values could lead to systemic upheaval and collapse.

There was a bank failure tonight, the second of the year. State regulators closed Highland Community Bank, a small bank with two locations in Chicago. Its $54 million in deposits were transferred to United Fidelity Bank, which is also purchasing the assets of the failed bank. Highland Community Bank’s capital dwindled from $25 million to nothing over the last two years. A deal to recapitalize the bank fell through in July.

Wednesday, January 21, 2015

It is hard to avoid the subject of layoffs in tonight’s news, with the biggest focus on 4,000 job cuts at American Express and 2,400 at eBay and PayPal. There are rumors of similar cuts at AOL and Clear Channel. It is too soon to add up the oil extraction job cuts that are on the way, but those surely add up to more than 20,000. This is a lot of job losses to consider all at once, but it is important to keep the numbers in perspective. Even these totals are only enough to cancel out two days of job creation in the U.S. economy. It is a setback, but not enough to worry about in the context of the U.S. labor market. If people are fearful, it is because five years ago we heard reports of cuts like this week after week. But tonight’s announcements are the exception, drawing so much attention just because it is now so rare to have this many job cuts in one week.

Monday, January 19, 2015

Now that the “myRA” starter retirement account has gone live, a lot of people must be wondering, what’s the point of the new retirement vehicle? Indeed, there is no reason to think about the myRA if you already have an IRA. If you opened your IRA more than five years ago, you may not realize the fees savers face now when they open new IRA accounts. You can pay thousands of dollars in account maintenance fees during the first few years before your account reaches the threshold level, at least $10,000, where custodians begin to waive fees. Banks and fund managers were forced to raise fees on retirement accounts because of the abnormally low interest rates of the past six years. For people starting out their retirement savings, though, this is a psychological obstacle at least. Who wants to open a new savings account just to watch your balance dwindle for years because of fees that greatly exceed the interest you might earn? You can’t just plop $20,000 into your new IRA because tax rules don’t let you contribute that much all at once. So you how do you get started?

The myRA is an answer for that, a low-management retirement savings arrangement in which fees won’t wipe out all your earnings. It pays a low interest rate, but you wouldn’t earn much interest on the small balances in the account in any case. The important thing is that the myRA won’t erode your savings through fees. Of course, after a few years you will have saved enough that it will make sense to start actively managing your account, and that’s when it’s time to convert the myRA to an IRA.

As a transitional vehicle that might save someone a few thousand dollars over a period of a few years, the myRA might not seem that important. But if you look at it as a way to remove the largest obstacle that prevents people from getting started on retirement savings, then you realize how much of a difference it will make.

Sunday, January 18, 2015

The last two weekends have been the busiest I have seen in years in my local area in Pennsylvania, aside from Black Friday and the days before storms. If measured by the number of cars in commercial neighborhoods and the number of people in stores, these two weekends have been busier than any of last month’s pre-Christmas weekends. It can only be the effect of lower gasoline prices making shoppers feel that they can afford a shopping trip.

I bought gasoline yesterday myself. Imagine my surprise when I filled my tank for less than $20. I don’t remember that happening in the last 10 years. It is hard to avoid the conclusion that I can drive around more freely than I did last year. It is also hard to imagine that the low prices could last very long. Financially, it is the equivalent of every store having a sale at the same time. It is no wonder the stores were crowded.

This will surely take sales away from online retail, which won’t get the orders for the products that shoppers buy locally. Their time will come around again, though. It was after gasoline prices fell below $2.45 per gallon that shoppers reacted. No one expects fuel prices to stay that low indefinitely. Indeed, it is partly the thought that the low fuel prices are temporary that is encouraging shoppers to take action now.

Saturday, January 17, 2015

We get tired of saying it: last year was the hottest year on record. The much-ballyhooed “pause” in global warming in the 2000s has vanished when you look at the charts now. With the last three years of data added in, the “pause” was no more than a misinterpretation of short-term noise in an obvious upward trend.

The implications are well known. Humans will have to be less hot to keep the planet in a semblance of its current form. All the initiatives that have been suggested to date, such as burning less oil and stopping global population growth, will not be enough to protect coastal real estate. The land will have to be raised by one meter, then another. But if you think of the obvious techniques for raising the land level above the new sea level, it involves earth-moving equipment that burns enormous amounts of oil, just what we said we would have to do less of. As you can see, this is already a tricky problem.

Friday, January 16, 2015

The first U.S. bank failure of 2015 was found in Florida, where the O.C.C. closed First National Bank of Crestview, with three branches and $79 million in deposits. Monday is a holiday, so the closed branches will reopen Tuesday. The successor bank is First NBC Bank, based in Louisiana and acquiring its first presence in Florida with the purchase. First NBC Bank is purchasing more than three fourths of the failed bank’s assets.

The big upheaval in banking this week involved the Swiss franc. The central bank in Switzerland has for years tried to keep the Swiss franc stable in value relative to the euro, and in 2011 it set a limit of 1.20 francs to the euro. By 2014, though, the high costs of this strategy had put the bank under political pressure and a degree of financial duress. Yesterday things hit a breaking point, and the Swiss National Bank decided it had to float the franc, meaning it would let market forces determine the value of the currency. Traders weren’t prepared for the rapid changes that followed, which affected not only the value of the Swiss franc, but also of every related asset. The euro was affected, obviously, and the U.S. dollar, and there were ripple affects reaching to essentially every currency in the world. The value of the assets that the Swiss National Bank had been trading to rein in its currency were also affected, even though the central bank did not make any unusual purchases or sales. Gold especially showed shocking volatility yesterday.

The trading volatility continued into today, but for traders who gambled on the wrong side of the currency markets, the damage was already done yesterday. At least one currency broker each in New York, London, and New Zealand were crushed by the currency market moves.

Currency trading is done with high degrees of leverage, with traders typically covering only between 3 and 5 percent of their positions. Any trading day in which currency moves are larger than 5 percent, then, can cause a trader to lose more money than they originally put in. If this happens to more than a few of the customers at any one brokerage, it can leave the brokerage insolvent. In New Zealand, apparently about half of the customers of Global Brokers NZ Ltd lost everything, and after a few hours of this the broker was forced to close. Regulators in New Zealand are awaiting word as to whether the broker remains solvent and able to distribute funds to its remaining clients.

In London, Alpari says it is insolvent after more than half of customers yesterday suffered “losses which exceeded their account equity.” Total account losses occur to someone everyday in the unpredictable currency market, but it is extraordinary that this could strike more than half of a broker’s customers on the same day. It underscores the high risks involved in currency trading, where any trader, no matter how well informed and connected they are, has only a tiny fraction of the information they would need to predict changes in the values of currencies. In New York, FXCM, one of the biggest online trading platforms, was nearly wiped out after customers lost $225 million yesterday. It is seeking an emergency loan so that it can keep operating.

Another online currency broker, Swissquote, estimates that it took a hit of $24 million. In London, IG Group took a hit from delays in closing some of its hedged positions. It tried to keep its positions in sync with those of its customers, but in some cases was slower than they were in closing positions. It is safe to assume that these were delays of less than an hour, but they will cost the broker-dealer an estimated $46 million.

Some pundits took the opportunity to repeat the sensible advice that individual investors generally should not be gambling in the currency markets. That is true enough, but it was not only the retail investors who took losses. Several of the largest banks in the world made the exact same mistakes, but on a larger scale. According to published reports, Citigroup and Deutsche Bank each took estimated losses of $150 million on their currency positions yesterday. Barclays also is believed to have taken losses, though theirs were not as large. There were surely other banks that took extraordinary trading losses yesterday that we haven’t heard about yet, in part because it is not as easy as it sounds to tally up the gains and losses in an unusual day of trading.

Banks are by nature unprepared for this kind of unexpected market fluctuation. It is a vulnerability built into the financial risk models used throughout the global financial sector. These models typically look only at the last two years of trading to estimate the volatility of an asset, or how much its value could change. The Swiss franc had been rock-solid for four years, so all conventional risk models would report that the risk of holding Swiss francs was zero. By the same logic, other assets closely tied to the Swiss franc would also be assessed as having essentially zero risk. When these assets start to move, as they did yesterday, bank managers can only guess how large their exposure is. Most banks do not have accurate real-time information on their trading risks, so they have to rely on the presence of mind of the workers at the individual trading desks to scale back risks when markets turn volatile.

It is the kind of situation that makes a bank executive hope their traders got enough sleep last night. Realistically, especially in London, a lot of the traders are sleep-deprived essentially every day because of their long hours of work, and the lack of sleep inevitably leads to mistakes and bad decisions whenever something unusual happens during the trading day. Yesterday’s trading losses may revive the discussion of the losses that banks in London and elsewhere suffer because of the strategy of long hours of work and limited hours of sleep.

Thursday, January 15, 2015

This is the week that analysts thought we would see a flood of large-scale closings at U.S. retail. There have been several announcements, but it is all less than expected. Add these to last week’s list, with stores closing mostly in the first quarter:

Radio Shack (consumer electronics): at least 10 stores this month as leases expire (with more to follow, everyone assumes)

It is Canada where the big announcements are. Today two foreign-owned retailers gave up on their Canadian operations. Target is preparing to close all of its stores across Canada. Target filed for bankruptcy protection for its Canadian subsidiary today, but apparently that is just for the purpose of breaking leases. Target says it has 133 stores in Canada and 17,600 employees. It emphasizes it wants to make an orderly process of store closings, which I think means most stores will close in March and April. There won’t be store liquidations, as merchandise that doesn’t sell at the store-closing discounts can be packed up and shipped elsewhere. Analysts are saying Target’s biggest mistake in its Canadian venture was to try to do too much too soon. It had a sensible plan but lost money by implementing too rapidly. Target had a favorable holiday season in the United States and can easily afford the half-billion-dollar cost of closing its stores in Canada.

Also today Sony announced it is closing its stores in Canada next month. There are only 14 Sony stores, so this is a much smaller announcement. Sony is directing customers to other retailers that carry Sony products.

Corporations are not like people and don’t act the way that people do, and the most stark distinction you can make in this regard is that corporations lack a conscience. It is almost impossible for a corporation to recognize that an action it has decided to take in pursuit of its short-term interests might be evil or harmful in some other sense. It is important to note that this is not a deficiency in an individual corporation, but part of the nature of all corporations.

One of the best illustrations of this can be found in this PBS News Hour story:

The story is slightly worse than you might think from the headline. It is not that colleges aggressively recruit large numbers of students knowing they will have to choose only a small fraction of applicants to admit. The more pointed problem is that colleges spend enormous sums of money to pester and harass specific high school seniors to get them to apply to the college. The college does this specifically for students who they already know won’t be admitted to the college if they do apply. A college may specifically target a list of tens of thousands of high school seniors, carefully selected to be ineligible for admission. For this to work, recruiters and recruiting materials have to actively mislead the students to make them believe they have a chance of being admitted, a chance that the college knows isn’t there. The college is just chasing numbers; it is oblivious to the way its actions are affecting the lives of real people. It is the elite universities that do this the most because they can most easily absorb the cost, which runs into millions of dollars.

Why do colleges do this? It is to build their brand. The more applicants a college turns down, the more “selective” it can claim to be. But viewed from the outside, this is no more ethical than lining up a dozen dates for the prom, when you have no intention of attending the event at all. Obviously, a person who did this would ruin their reputation quickly. But we cannot hold corporations or colleges to the same standards of conduct that we hold people to.

Obviously, each of the people who work for a college has an individual conscience, but the college can get around this by splitting up the admissions department, so that the people who do recruiting are not the same people who decide which applicants get admitted. This way, the people in one office can say with a straight face, “We want you here,” while the people in the next office over, four months later, are the ones who say, “Get lost!” This process of division of labor is the same one any corporation uses to avoid having any individual conscience turn into a semblance of a corporate conscience.

There is another headline this week that shows a corporation acting with what at first might look like a conscience. Marriott last year got caught red-handed jamming radio frequencies to prevent its customers from using wi-fi in or near its facilities. It did what any unrepentant corporate criminal would do in the same circumstances: it petitioned the government to change the law so that its radio-frequency jamming would be legal. This week it had second thoughts about this and withdrew its petition, saying publicly it now believes its customers will be better off if permitted to use wi-fi. This story at CNNMoney:

A corporation with a conscience? Well, not exactly. The hotel chain acted only after it had been lampooned in the media and its reputation had taken a measurable hit. Marriott is a corporation that realizes it has a reputation, and that is a good thing, but it is not really the same as having a conscience. To demonstrate this distinction, Marriott may be withdrawing its petition to have its radio-jamming activities legalized, but it is continuing to press its case, now asking the FCC to “clarify” situations in which it can ignore the ban on radio jamming. That pretty well fits the picture of “unrepentant.”

Corporations may not have consciences, but they do understand the law, eventually if not immediately. This is why it is so important for the law to hold corporations to higher standards than it holds individuals to. Law must step in and fill the gap where conscience is absent.

Sunday, January 11, 2015

According to two recent measures, ebook unit sales declined over the course of 2014 while hardcover units increased slightly. This shouldn’t be taken as a trend in itself, but it shows that the ebook format has run out of steam after three years of stagnation in the technology.

The ebook medium has obvious advantages but equally obvious disadvantages. Holiday gift-giving looms large in the latest statistics, and if ebooks are rarely given as gifts it is for good reason. With most ebook platforms there is no provision for any meaningful physical custody of a book you buy. Gift-givers rightly worry that an ebook is not something you can hand to the recipient of a gift, but it goes beyond that. For the purchaser or nominal owner of an ebook, it is hard to feel like you really own the books in your ebook collection. Most of them, if you have more than a dozen, are in cloud storage, so that you have no idea of their physical location. Thèy are subject to terms of use, pages of legalese that no one can claim to fully understand, though it is hard to escape the suspicion that a future business failure or even a failed software update in the cloud, wherever it is, could wipe away your whole collection.

As gifts, ebooks are far too easily overlooked or forgotten. For purchasers, with so little sense of ownership it is hard to feel pride in ownership. Last year I predicted that avid ebook customers would stop buying books in advance. Maybe that has started to happen. How many unread ebooks can you “own” before you start to feel conflicted about buying more that you also don’t have time to read? Answers will vary, of course, but once you pass that threshold, your purchases will tend to fall off to match your reading pace.

Purchases could fall off faster than that. In theory, two readers could avoid all new purchases for a time just by borrowing each other’s collections. Early adopters of ebooks can now re-read ebooks they originally bought five years ago. Regardless of publishers’ efforts to inhibit the reuse of ebooks, the ephemeral nature of the medium makes ebooks inherently more reusable than a physical book could ever be, though at the same time, technology is also making printed books more reusable than they were in the past. All this means that the ratio of sales to reading has to decline over time as customers adapt.

The stagnation that has characterized ebooks in recent years obviously has to give way eventually, and I think ebooks could gain broader acceptance as the technology advances, but there are limits to this optimistic scenario. If all current new book sales switched over to the ebook medium, ebook reading could increase by a factor of 5, but for the reasons I have mentioned, ebook revenue would go up by only a factor of 2. Would that support the book industry in its current form? Obviously not. Indeed, one doubts the survival of some of the key ebook platforms in this scenario. They could be killed off by their own success.

In the meantime the encouraging note is that the stark contrast between ebook and printed book is encouraging readers to take books more seriously. If you are going to take the time to read and think about a book, shouldn’t it be a carefully selected book, and a hardcover at that? This new thinking is not entirely good news for publishers — serious customers might be willing to pay more, but they are the ones who expect more of a product and buy more cautiously. The flood of low-quality books that has characterized the book business for the last quarter century will surely not stand up to the new scrutiny. History assures us, though, that the book industry can survive and thrive on a smaller scale than it currently enjoys.

Thursday, January 8, 2015

January is usually the month to announce store closings, but there may not be so many to talk about this month after an unusual pattern of announcements and actual closings last month.

Lower gasoline prices fueled a relatively benign Christmas shopping season at retail and helped troubled retailers hang on. Sales were essentially flat at Barnes & Noble stores in November and December, compared to the year before, and that result is something to brag about when you look at where the print book business is going. I thought I saw a good level of activity when I visited Barnes & Noble stores, and I certainly didn’t see price cuts or higher operating costs compared to the year before, so it seems safe to say Barnes & Noble has bought itself at least another two quarters to tinker with its business model. The same is probably true at Radio Shack. Its relatively isolated stores could expect a bigger boost than most retailers from lower fuel prices that let shoppers drive around more freely. Radio Shack wants to close half of its stores, but only in a way that lets the other half stay open, and it now appears it may get that chance.

It is JCPenney that has the big store closing announcement so far. After holiday-season sales up 3.7 percent from the dismal year before, JCPenney is set to close 4 percent of its stores in April.

Meanwhile, after December news for Wet Seal and Deb, the news gets worse. Wet Seal is closing 2/3 of its stores this week. The entire Deb chain has been turned over to liquidators, with liquidation sales to start any day now, though the deep discounts may not arrive until March. Another fashion retailer, C. Wonder, left with only 12 locations after closings in November, is closing those now too. Retail analysts expect a few more announcements like this to come within the next week or so.

Tuesday, January 6, 2015

I already had below-average electric consumption three years ago when I decided I wanted to replace my home appliances with newer ones that would consume less electricity. It was a longer process than I imagined, but one I probably finished today, replacing my 1987 refrigerator with a new one made in 2014. The old refrigerator was still working and might have kept going with some auto-style body work on the refrigerator door, but there were other reasons just to rely on duct tape to keep the refrigerator closed in the interim and order a whole new refrigerator. The biggest reason was the electric bill. I estimated I would save $28 per month by replacing my 1980s refrigerator with an ordinary current refrigerator design. The required Energy Guide labels have led manufacturers to find ways to make appliances like refrigerators more efficient. When you look at what refrigerators cost now — actually less in nominal terms than they did in the 1980s — I can expect to break even on the new refrigerator in August 2016. After that I will just be saving money. That’s a very good investment — an ROI around 60 percent, if you’re keeping score that way. The new refrigerator is black, by the way, just because that was the one color that was on sale, but I’ve been telling my friends I got black because “black is the new black.”

A year earlier, on the other side of the kitchen, I replaced the dishwasher. In the basement, it was the well pump, water heater, washer, and dryer. During the same two years I replaced most of my old-style light bulbs with LED light bulbs. The combined effect is that my home electric consumption in an ordinary month will be about what it used to be when I was away on vacation. (Well, I might call it a vacation, but in truth, I was away working somewhere in some capacity.) I spent thousands of dollars in total but may have already recovered a quarter of that in lower electric bills.

There is just one thing that is slightly off about the new refrigerator. It is lit inside by a plain old 40-watt light bulb, a ridiculous waste of energy that surely could be replaced with an equally bright 5.5 watt bulb. That, though, is a problem for another day.

Sunday, January 4, 2015

“Honey, guess what?! The paint store was having a big sale, so I bought enough paint to repaint the whole house, inside and out!!”

Ha. Obviously, there is something wrong in the story embedded in the line above. There is an error of emphasis. Painting a house is an outcome that depends less on the purchase of paint than on a highly labor-intensive process of moving furniture, covering, masking, painting, and much more. That effort is an order of magnitude bigger than the cost of the paint, even if you add in all the other materials and equipment. For someone to buy 200 gallons of paint without stopping to think about the way they might be spending their next 75 weekends painting, is just —

Well, it’s a twentieth-century mistake, and the twentieth century is over. We’ve learned that “consuming” a product inevitably involves some degree of work or commitment of time. If we’re talking about furniture, for example, you might choose to carry a big, blocky object that weighs as much as you do into your home. You’ll need to enlist the help of a couple of other people to accomplish that. Another approach is to take the furniture home in pieces and assemble it there. That makes the carrying easier, but then you have to be good with tools like wrenches and screwdrivers. If you don’t want to do the work yourself, you can have the furniture delivered by professionals, but this requires a major time commitment, usually of a two- or three-hour delivery time window, but with the understanding that this can easily stretch into four hours or longer. You might buy furniture one time without thinking about the logistics, but having done so, you wouldn’t make the same mistake the next time.

In general, we’ve wised up. There are still plenty of businesses trying to sell us stuff we don’t necessarily have time for, more than ever I suppose, but we don’t get taken in as easily as we might have 25 or 50 years ago.

I think this is the trend I am seeing with the many signs of easing time pressure I have seen in this year’s Christmas shopping season and continuing up to the present. The easing time pressure is related to the easing financial pressure, of course. We expect that a recession leads to a burst of time pressure as consumers look for cost-cutting measures, most of which, of course, require extra time in one form or another. As the financial pressures of recession ease up, consumers eventually can relax again, and time pressure should, in theory, ease up.

But that is only the beginning of what is going on now. Consumers are feeling less pressure, and at the same time are properly skeptical of product claims that may involve a hidden time commitment. If the time it takes to learn to use an impressive-looking new product could plunge you right back into the time pressure that you are just easing out of, you’ll tend to postpone the purchase until you have the time available — if that ever happens. This is the pattern I believe I have observed among the Christmas shoppers I have seen. It explains how people can feel so at ease with their purchases without actually buying very much.

Modern economic thought holds that there is no end to the things that people want. When this axiom was formulated, though, it was not so easy to imagine the way that consumers’ schedules could so fill up. Our wants may be insatiable, but there are only so many hours in the week. Perhaps it is a situation that would call for more time-saving products, but that too has its limits. Every form of time-saving is a technique that has to be learned, and that learning takes time. Recall that time management was a fad of the 1990s that ultimately failed because the time management systems themselves took up too much time. The Internet has brought us no end of new low-cost ways to keep in touch with the world, but every new thing we do takes away some time. We adapted initially by sleeping less, but that obviously didn’t serve, and people are being more conscious now of protecting their sleep hours. We are getting better at deleting irrelevant content and turning away from new demands on our time.

I expect big changes in 2015 because of consumers who have a newfound sense of ease and freedom about their time. When people finally have a little bit of time on their hands, one of the first things they will think to do is to find solutions for all the problems and irritations they have had to put up with for the last five, ten, or fifteen years. If that is the direction people are going in, it will lead to changes across the board, changes that no corporation, no matter how big its market research and advertising budgets, can predict or control.

Friday, January 2, 2015

The pace of U.S. bank failures, already low in 2014, will probably decline again in 2015. Some of the banks that had commercial real estate loan portfolio problems five years ago have seen their fortunes improve — either because borrowers got better footing in an improving economy or from making new loans in less troubled areas. At the same time, investors are less reluctant to put money into banking ventures and may be willing to take some initial losses that go with buying a troubled bank to gain the advantages that go with a business that is already up and running.

Looking farther ahead, I cannot be quite so optimistic. There are two trends that seem to be on a collision course. Banking is still an industry that desperately needs to cut costs, and there is a special emphasis this year on mobile apps that, it is hoped, will lessen customers’ reliance on bank branches. At the same time, there are also banks that are trying to expand rapidly. It is a truism in business management that the best time to expand your presence in a troubled industry is the year before it hits bottom. Dozens of bank executives and thousands of banking investors were convinced that 2009 was that year, and many of those ventures flamed out spectacularly in 2012 and 2013. Some of the very same dealmakers now think 2015 is the year to get into banking. They are, I believe, still at least four years too early. At the rate the industry is going, it needs another four to seven years of cost-cutting before it will make sense to chase customers the way the industry routinely did a decade ago. Growth in an era of cost-cutting is always a dicey business. Some of the most confidently expanding banks of 2015 will require some kind of rescue by 2018.